Leighton sacks manager amid probe turmoil

AUSTRALIA'S biggest construction company, Leighton Holdings, has sacked a senior manager working in its offshore business amid a corruption investigation into its Iraq operations by the Australian Federal Police.

The announcement comes as BusinessDay can reveal another of Leighton's construction projects is in financial trouble. The project, the $705 million Sapphire to Woolgoolga upgrade of the Pacific Highway, is understood to have claims on the job of up to $140 million.

Industry sources said yesterday Leighton set the job poorly and got hit by wet weather.

The project is a joint venture between Leighton and New Zealand-based Fulton Hogan.

The company refused to comment on individual projects but said it would disclose anything material in accordance with its obligations.

Leighton's credibility has been battered over the past two years after a string of profit downgrades, big write-downs in two projects - the Victorian desalination plant and Brisbane's Airport Link - and a capital raising.

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It has also been the subject of an investigation into allegations of bribery in the Middle East. Leighton told the ASX yesterday it had completed an internal review into its Iraq projects and had uncovered instances of failures to meet governance standards in respect of the proper documentation of contractual arrangements.

It refused to reveal the identity of the manager it had sacked but said his conduct was not criminal and the decision to sack him was a disciplinary action rather than pre-empting anything that might emerge from the AFP's investigation.

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"I won't confirm or deny who is or isn't working for the company," a spokeswoman said.

She said the company had notified the AFP of the findings of its internal review and said Leighton continued to co-operate with its investigations.

Leighton approached the AFP in February after identifying suspicious payments made in its Iraq operations. That investigation is ongoing and involves the possibility that Leighton Offshore had been involved in corruption in Iraq in connection with work to expand offshore loading facilities for Iraq's oil exports.

Leighton is thought to have uncovered the payments during an internal examination last year after the Australian Securities and Investments Commission began an investigation into the company's massive write-downs.

Investors remain concerned about the Iraq investigation as penalties for bribery and corruption are substantial.

There are also concerns about the impact on Leighton's order book as it has decided to ban facilitation payments - money paid to foreign agencies for procuring permits or processing government papers - in the wake of the AFP probe.

A former executive said the statement issued by Leighton yesterday was vague and lacked transparency. He said the ASX statement raised more questions than it gave answers.

"Is this a precursor to an admission of evidence of foreign bribery? Is the AFP about to take action? Or is Leighton over-reacting? This statement leads us nowhere," he said.

Leighton boss Hamish Tyrwhitt said in the statement: "Leighton's values are integral to Leighton's approach to business. No deviation from those values will be tolerated and appropriate disciplinary action will be taken if necessary.''